United States v. Mills, 2247.

• Decision Date: 12 July 1934
• Docket Number: No. 2247.,2247.
• Parties: UNITED STATES v. MILLS.
• Court: U.S. District Court — District of Maryland

7 F. Supp. 547

UNITED STATES v. MILLS.

No. 2247.

District Court, D. Maryland.

July 12, 1934.

Bernard J. Flynn, U. S. Atty., and Cornelius Mundy, Asst. U. S. Atty., both of Baltimore, Md., Charles Fahy, First Asst. Sol., Department of Interior, of Washington, D. C., Chas. I. Francis, Sp. Asst. to Atty. Gen., and Robt. L. Stern, Atty. Petroleum Administration Board, of New York City, for the United States.

Alex. Armstrong and Arthur W. Machen, Jr. (of Armstrong, Machen & Allen), both of Baltimore, Md., and Scott M. Wolfinger and D. K. McLaughlin, both of Hagerstown, Md., for defendant.

CHESNUT, District Judge.

This case arises in the course of administration of the National Industrial Recovery Act (15 U. S. C. c. 15, § 701 et seq. 15 USCA § 701 et seq., 73rd Cong. 1st Sess., 48 Stat. 195). The plaintiff is the Government of the United States which is seeking to enforce against the defendant, a retail vendor of gasoline, by injunction, applied for by the bill in equity in this case, the provision against premium giving of Rule 17 of Article V of the Code of Fair Competition for the Petroleum Industry, approved by the President on August 19, 1933, pursuant to section 3 (a) of title 1 of the Recovery Act (15 USCA § 703 (a). The rule reads as follows:

"Except by permission of the Planning and Co-Ordination Committee, the refiners, distributors, jobbers, wholesalers, retailers and others engaged in the sale of petroleum products shall not give away oil, premiums, trading stamps, free goods or other things of value or grant any special inducement in connection with the sale of petroleum products."

It is alleged by the Government, and admitted by the defendant, that he does in the course of his business at times give away other articles of merchandise, such as glass and china ware, without extra charge therefor, in connection with the sale of a certain quantity of gasoline, usually five gallons. The articles so freely given do not involve any element of chance but are definitely described in advertisements thereof publicly made by the defendant. It is not denied by him that his course of dealing in this respect is contrary to the provisions of the rule, but he bases his resistance to its enforcement against him on certain principles of federal constitutional law which include:

(a) The contention that the Recovery Act is invalid because it is a delegation of congressional authority to the executive officers of the Government without a delineation of definite principles to be applied in administration of the law;

(b) That the enforcement of the rule against him will deprive him of property without due process of law in violation of the Fifth Amendment; and

(c) That if the Act is valid, its scope is necessarily limited to the extent of authority given to Congress by the Constitution, article 1, § 8, cl. 3, "To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes," and by clause 18 "To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof"; and that the defendant's business practice, which is objected to, is not within the range of the constitutional power so given to Congress, especially as it is expressly provided by the Tenth Amendment "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people."

It is obvious that if any one of these propositions advanced by the defendant is sound, the bill must be dismissed. I will begin with the last, as it deals with the scope and extent of the Act rather than with its constitutionality as a whole. The case has been submitted for final decree upon bill, answer and testimony in open court.

Counsel for the Government in this case concede that the Recovery Act is based on the power of Congress to regulate commerce among the several states and make no contention for other constitutional authority for it. As I concur in this view, it will be unnecessary to consider any other possible constitutional basis for the Act. (Note I.) The question for decision, therefore, is whether the particular provision of the Petroleum Code above quoted, which is sought to be enforced against the defendant, is within the scope of the power of Congress to regulate commerce among the several states, as construed and applied by the Supreme Court.

At the outset it is to be observed that the defendant's activity sought to be enjoined is not an incident of interstate commerce. He is the proprietor of four gasoline filling stations of the ordinary type, one in Hagerstown, Maryland, one in Frederick, Maryland, one in Shippensburg, Pennsylvania, and one in Chambersburg, Pennsylvania. He purchases gasoline from the Republic Oil Company in Baltimore, Maryland, and has it transported to his trackside filling stations at the four locations. The shipments of gasoline from Baltimore to the Pennsylvania towns are obviously operations in interstate commerce but in themselves have no bearing on the case; nor is there any course of dealing between the defendant's Maryland and Pennsylvania filling stations involved in the case. What is complained of by the Government is the purely local giving of premiums upon the sale of gasoline to individual purchasers at the several filling stations. The interstate commerce involved in the shipments from Baltimore to the Pennsylvania filling stations has obviously ceased when the gasoline is placed in the defendant's tanks at Chambersburg and Shippensburg, and it appears from the evidence that, so far as the Maryland stations are concerned, the interstate traffic had ceased even before the defendant's purchases from the general storage supply of the Republic Oil Company in Baltimore. Gasoline is, of course, the product of refining crude petroleum and the latter is not produced in Maryland. It appears that the Republic Refining Company procures its crude petroleum, which is refined into gasoline, from Texas. Its movement into Maryland is, of course, interstate commerce but this interstate movement is complete when the gasoline reaches the general storage supply of the Republic Oil Company in Baltimore where it is purchased by the defendant. These particular facts are but incidents of the case. The essence of the question involved is whether after the interstate movement of the petroleum and the gasoline, its product, has ceased, the sale thereof at retail within a particular state by the defendant is within the regulatory power of the section of the Petroleum Code which prohibits the retailer from giving a premium to the purchaser as an inducement to his purchase. The retail sales are made to ultimate consumers and are not intended for movement in interstate commerce (although of course there is no prohibition on the disposition thereof by the purchaser).

It is clear the defendant is engaged purely in the internal commerce of a state and not in commerce among the several states. Nashville, C. & St. L. Ry. v. Wallace, 288 U. S. 249, 266, 53 S. Ct. 345, 77 L. Ed. 730, 87 A. L. R. 1191; Edelman v. Boeing Air Transport, 289 U. S. 249, 53 S. Ct. 591, 77 L. Ed. 1155; Rast v. Van Deman, 240 U. S. 342, 360, 36 S. Ct. 370, 60 L. Ed. 679, L. R. A. 1917A, 421, Ann. Cas. 1917B, 455; Industrial Association v. United States, 268 U. S. 64, 79, 45 S. Ct. 403, 69 L. Ed. 849; Hammer v. Dagenhart, 247 U. S. 251, 38 S. Ct. 529, 62 L. Ed. 1101, 3 A. L. R. 649, Ann. Cas. 1918E, 724; Coe v. Errol, 116 U. S. 517, 6 S. Ct. 475, 29 L. Ed. 715; Chassaniol v. City of Greenwood, 291 U. S. 584, 54 S. Ct. 541, 78 L. Ed. 1004. Indeed it would be difficult to state an activity more clearly involving only intrastate commerce than the business of local sales of gasoline from filling stations. "Gasoline is one of the ordinary commodities of trade, differing, so far as the question here is affected, in no essential respect from a great variety of other articles commonly bought and sold by merchants and private dealers in the country." Williams v. Standard Oil Co., 278 U. S. 235, 240, 49 S. Ct. 115, 116, 73 L. Ed. 287, 60 A. L. R. 596. The Government does not contend to the contrary. Its position, as stated in the brief of its counsel, is as follows:

"The Government does not claim that the use of premiums in connection with the retail sale of gasoline is interstate commerce. The Government contends that the retail sale of gasoline and the practices which control the prices at which gasoline is sold have a substantial and direct effect on interstate commerce in gasoline and crude petroleum throughout the Nation."

It is thus important to note, in delimiting the precise legal issue presented, that the defendant's activities complained of are clearly not in the course of commerce among the states, or in the stream or current thereof, but nevertheless the Government does contend that the defendant's intrastate activity is subject to national regulation because it has "a substantial and direct effect on interstate commerce." And it is said by counsel for the Government that the factual basis for this contention is to be found in the testimony in the case which somewhat elaborately presents a comprehensive picture of the Petroleum Industry of the United States with special reference to the sale of gasoline.

I find the following relevant facts to be established by the testimony.

Petroleum constitutes the third largest national industry. It begins with the production of crude petroleum from oil wells in 17 or 18 states. The wells are of two classes, referred to as "stripper" wells (where the oil has to be pumped from the well) and "flush" wells (where the oil flows from the ground without the expense of pumping). The flush fields are practically limited to the States of Texas, Oklahoma and...